By Akshay Bhatia on
As the Narendra Modi juggernaut rolls across the country at a feverish pace and his words reverberating for days wherever he goes, critics seem to be in dire need of some oxygen. This much needed oxygen was delivered by Raghuram Rajan in the form of his Report on Composite Development Index of States. Whether or not this report was used as a ladder by the now Governor of Reserve Bank for his new appointment is anyone’s guess. Weeks after his appointment as the RBI Governor, Raghuram Rajan has certainly delivered on two fronts, though not as the Governor, but as the man UPA needed to pin down the Gujarat Growth Story through chicanery and preparing ground for giving special status to prospective allies.
As soon as the report was made public, media went ballistic, flashing how Gujarat ranked number 12 according to the report. As is the case most times when any news against Narendra Modi comes out, logic and common sense took a back seat. None of the media stalwarts speaking and writing about the report, unfortunately, seem to have actually read the entire report. If they had, we would have been able to save hundreds of trees by preventing the wastage of tonnes of paper which was used to write op-eds ridiculing Modi and Gujarat.
For those who haven’t either read or understood the report, here is why this report doesn’t stand its ground on multiple fronts:
Is it a Committee Report or personal opinion?
Of the six members, Najeeb Jung ceased to be a member after taking over as the Lt Governor of Delhi. Another member Shaibal Gupta had strong reservations on a lot of criteria used in the report which were never addressed, forcing him to write a strong dissent note. The report itself states that they did not achieve full consensus on every issue. Can a report whose committee members themselves are not unanimously convinced of it’s merit, be trusted?
When the committee members are themselves not unanimous over the report and the indicators used, it is more of an extension of personal bias, or at best a personal opinion. But after such serious misgivings, accepting this academic exercise as a report would be wrong.
What was the urgency to come out with the report without taking all members on board?
What was the need to hurriedly release this report in spite of serious differences and unresolved discussions? One of the committee members was constrained to submit a strong note of dissent. It is not only that he did not agree with the choice of indicators of backwardness, he was opposed to many of the indicators. Why no heed was paid to Shaibul Gupta (one of the committee members) and his well-meaning and logical arguments? His suggestions were repeatedly not considered in spite of his conviction and logic. In fact, he pointedly states that the majority of the Committee seems to have expressed some judgments that define logical arguments.
Was this report rushed through only to secure political gains keeping in mind the upcoming elections? The favourable positioning of West Bengal, Uttar Pradesh and Bihar and placing Gujarat along the lesser developed States smells of connivance.
Does this report truly measure development?
The answer here is a big NO. The report is designed to identify the needs of a State. Needs are not necessarily equivalent to underdevelopment. The index in fact is composed of 75 per cent weightage to needs and 25 per cent to performance. It does not adequately capture ‘performance’ per se. Such “point in time” studies never do adequate justice to the development in the recent past as in the case of Gujarat. For example, Gujarat has been the State to make maximum improvement in tackling malnutrition as well as growth in per capita income as well as a many similar indicators in the last decade.
But such a report does not adequately focus on the recent development and also carries the burden of the past legacy. So it will be totally unfair and deceitful to gauge the development of any State, leave aside Gujarat, using this index!
Why include MPCE instead of Per Capita Income?
Per capita income is considered the standard, time-tested indicator which is used by the Planning Commission, Finance Commission and also in the Gadgil Formula. As rightly pointed out by Shaibal Gupta, the Finance Minister’s latest budget speech also clearly indicates and instructs the use of per capita income as a parameter in preparing a fresh index. The Finance Minister said: “It may be more relevant to use a measure like the distance of the State from the national average under criteria such as per capita income, literacy and other human development indicators” to determine their backwardness.
The use of monthly per capita expenditure instead of per capita income inspite of such clear directive from Finance Minister and opposition by committee members seems baffling and beyond reason.
Monthly per capita expenditure is based on national sample survey which itself concedes that the estimates are subject to errors of estimation, especially in calculating the rural-urban MPCE differentials across States. Another problem with MPCE is the presence of inter-State price differentials which can be as high as 30 per cent to 40 per cent. Hence MPCE can distort the index, which it has actually done by giving the surprising conclusion of Gujarat being a less developed State whereas in reality it is one of the most economically prosperous States of India today.
Also, the spirit of saving and investing in Gujaratis is well-known and documented. But by using the monthly per capita expenditure, the savings which are inherent in a prosperous population and directly proportional to Gujarat’s prosperity are not taken into account.
Why include SC/ST population but not other strategic limitations?
The Committee initially agreed that the chosen indicators should all be ‘outcome’ variables, not background variables. However, in spite of this decision, ‘Percentage of SC/ST population’ was chosen as one of the variables, which certainly is not an outcome variable. This will certainly work at a disadvantage to the states with large SC/ST population.
This report also fails to note the disadvantage to States like strategic location, absence of natural resources, desert regions, drought-prone areas and environmentally fragile areas viz. Hilly areas, coastal areas as well as areas prone to National Disasters like earthquake, flood, cyclone etc. which are necessary to gauge the real reasons for underdevelopment.
Thus, while considering the SC/ST population, the report doubles the disadvantage of States because it is already documented by other indicators, but it fails to consider the real geographic limitations of states in a vast country like India.
Considering so many of flaws in this report and the undertone of a political smear campaign, this report, unfortunately, will fail to address its core requirement i.e. identify the backward States systematically and allocate adequate funding for them.
The need of the hour is to develop a dynamic index of development consisting of outcome variables which can capture progress made over a plan period or over a decade in respect of the indicators and identify and evaluate how the States progress (or the converse) over a period of time. Such a dynamic index would help the States and the Centre to introspect and review their own progress from time to time and enable them to take corrective measures and revise suitable policies for the betterment of the people.
Ultimately if India is to move forward, the States have to prosper. This requires a positive mindset and not a negative one of trying to play politics with development.
(The writer can be followed on Twitter at @AkshayBhatia01)
As the Narendra Modi juggernaut rolls across the country at a feverish pace and his words reverberating for days wherever he goes, critics seem to be in dire need of some oxygen. This much needed oxygen was delivered by Raghuram Rajan in the form of his Report on Composite Development Index of States. Whether or not this report was used as a ladder by the now Governor of Reserve Bank for his new appointment is anyone’s guess. Weeks after his appointment as the RBI Governor, Raghuram Rajan has certainly delivered on two fronts, though not as the Governor, but as the man UPA needed to pin down the Gujarat Growth Story through chicanery and preparing ground for giving special status to prospective allies.
As soon as the report was made public, media went ballistic, flashing how Gujarat ranked number 12 according to the report. As is the case most times when any news against Narendra Modi comes out, logic and common sense took a back seat. None of the media stalwarts speaking and writing about the report, unfortunately, seem to have actually read the entire report. If they had, we would have been able to save hundreds of trees by preventing the wastage of tonnes of paper which was used to write op-eds ridiculing Modi and Gujarat.
For those who haven’t either read or understood the report, here is why this report doesn’t stand its ground on multiple fronts:
Is it a Committee Report or personal opinion?
Of the six members, Najeeb Jung ceased to be a member after taking over as the Lt Governor of Delhi. Another member Shaibal Gupta had strong reservations on a lot of criteria used in the report which were never addressed, forcing him to write a strong dissent note. The report itself states that they did not achieve full consensus on every issue. Can a report whose committee members themselves are not unanimously convinced of it’s merit, be trusted?
When the committee members are themselves not unanimous over the report and the indicators used, it is more of an extension of personal bias, or at best a personal opinion. But after such serious misgivings, accepting this academic exercise as a report would be wrong.
What was the urgency to come out with the report without taking all members on board?
What was the need to hurriedly release this report in spite of serious differences and unresolved discussions? One of the committee members was constrained to submit a strong note of dissent. It is not only that he did not agree with the choice of indicators of backwardness, he was opposed to many of the indicators. Why no heed was paid to Shaibul Gupta (one of the committee members) and his well-meaning and logical arguments? His suggestions were repeatedly not considered in spite of his conviction and logic. In fact, he pointedly states that the majority of the Committee seems to have expressed some judgments that define logical arguments.
Was this report rushed through only to secure political gains keeping in mind the upcoming elections? The favourable positioning of West Bengal, Uttar Pradesh and Bihar and placing Gujarat along the lesser developed States smells of connivance.
Does this report truly measure development?
The answer here is a big NO. The report is designed to identify the needs of a State. Needs are not necessarily equivalent to underdevelopment. The index in fact is composed of 75 per cent weightage to needs and 25 per cent to performance. It does not adequately capture ‘performance’ per se. Such “point in time” studies never do adequate justice to the development in the recent past as in the case of Gujarat. For example, Gujarat has been the State to make maximum improvement in tackling malnutrition as well as growth in per capita income as well as a many similar indicators in the last decade.
But such a report does not adequately focus on the recent development and also carries the burden of the past legacy. So it will be totally unfair and deceitful to gauge the development of any State, leave aside Gujarat, using this index!
Why include MPCE instead of Per Capita Income?
Per capita income is considered the standard, time-tested indicator which is used by the Planning Commission, Finance Commission and also in the Gadgil Formula. As rightly pointed out by Shaibal Gupta, the Finance Minister’s latest budget speech also clearly indicates and instructs the use of per capita income as a parameter in preparing a fresh index. The Finance Minister said: “It may be more relevant to use a measure like the distance of the State from the national average under criteria such as per capita income, literacy and other human development indicators” to determine their backwardness.
The use of monthly per capita expenditure instead of per capita income inspite of such clear directive from Finance Minister and opposition by committee members seems baffling and beyond reason.
Monthly per capita expenditure is based on national sample survey which itself concedes that the estimates are subject to errors of estimation, especially in calculating the rural-urban MPCE differentials across States. Another problem with MPCE is the presence of inter-State price differentials which can be as high as 30 per cent to 40 per cent. Hence MPCE can distort the index, which it has actually done by giving the surprising conclusion of Gujarat being a less developed State whereas in reality it is one of the most economically prosperous States of India today.
Also, the spirit of saving and investing in Gujaratis is well-known and documented. But by using the monthly per capita expenditure, the savings which are inherent in a prosperous population and directly proportional to Gujarat’s prosperity are not taken into account.
Why include SC/ST population but not other strategic limitations?
The Committee initially agreed that the chosen indicators should all be ‘outcome’ variables, not background variables. However, in spite of this decision, ‘Percentage of SC/ST population’ was chosen as one of the variables, which certainly is not an outcome variable. This will certainly work at a disadvantage to the states with large SC/ST population.
This report also fails to note the disadvantage to States like strategic location, absence of natural resources, desert regions, drought-prone areas and environmentally fragile areas viz. Hilly areas, coastal areas as well as areas prone to National Disasters like earthquake, flood, cyclone etc. which are necessary to gauge the real reasons for underdevelopment.
Thus, while considering the SC/ST population, the report doubles the disadvantage of States because it is already documented by other indicators, but it fails to consider the real geographic limitations of states in a vast country like India.
Considering so many of flaws in this report and the undertone of a political smear campaign, this report, unfortunately, will fail to address its core requirement i.e. identify the backward States systematically and allocate adequate funding for them.
The need of the hour is to develop a dynamic index of development consisting of outcome variables which can capture progress made over a plan period or over a decade in respect of the indicators and identify and evaluate how the States progress (or the converse) over a period of time. Such a dynamic index would help the States and the Centre to introspect and review their own progress from time to time and enable them to take corrective measures and revise suitable policies for the betterment of the people.
Ultimately if India is to move forward, the States have to prosper. This requires a positive mindset and not a negative one of trying to play politics with development.
(The writer can be followed on Twitter at @AkshayBhatia01)
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